CITIBANK, N.A., PETITIONER V. NGOC QUANG TRINH
No. 88-1031
In The Supreme Court Of The United States
October Term, 1989
On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Sixth Circuit
Brief For The United States As Amicus Curiae
This brief is filed in response to the Court's order inviting the
Solicitor General to express the views of the United States.
TABLE OF CONTENTS
Question Presented
Statement
Discussion
Conclusion
QUESTION PRESENTED
Whether, contrary to the design of federal banking regulation, a
United States bank may be held liable for deposits made with its
branch in a foreign country when the foreign government prevents the
branch from repaying those deposits.
STATEMENT
Petitioner Citibank N.A. (Citibank) seeks review of a court of
appeals' decision holding that Citibank's New York office is obligated
to repay, in dollars, piaster-denominated deposits that a Vietnamese
citizen placed with a Citibank branch formerly operated in Saigon,
Republic of Vietnam. The court of appeals concluded that the deposit
agreement, interpreted under Vietnamese law, absolved Citibank's
Saigon branch of liability to respondent when the branch closed in
anticipation of Saigon's imminent fall to hostile forces. The court
further concluded, however, that respondent could seek repayment from
Citibank's New York office because the deposit agreement did not
expressly prohibit such an action. See Pet. App. 1a-32a. /1/
1. During the Vietnam conflict, Citibank maintained a branch office
(Citibank/Saigon) in the Republic of Vietnam (South Vietnam). /2/
Citibank operated Citibank/Saigon in accordance with Vietnamese law,
which required that Citibank conduct its banking operations through a
branch (rather than a subsidiary), that the branch keep all of its
assets in the local currency (piasters), and that it maintain a
specified level of paid-in capital reserves. Citibank/Saigon accepted
passbook savings deposits from Vietnamese citizens, paid interest far
in excess of that available on United States accounts, and required
that depositors execute a standard deposit agreement setting forth
withdrawal conditions and liability provisions. Pet. App. 2a-3a,
20a-21a.
On July 25, 1974, Quang Quy Trinh, a retired Vietnamese senator,
opened a passbook savings account at Citibank/Saigon. He deposited 2
million piasters, named himself and respondent (his son who was
attending school in Michigan) as joint account holders, and signed the
branch's standard deposit agreement. The agreement stated that the
deposits would be payable only at "Citibank's place of business,"
which was identified as "28-30 Nguyen Van Thinh, Saigon, 1 Republic of
Vietnam," and that they would be payable only in the form of piasters.
In addition, the deposit agreement stated that "Citibank does not
accept responsibility for any loss or damage suffered or incurred by
any depositor resulting from government orders, laws, levies, taxes,
embargoes, moratoriums, exchange restrictions or from any other cause
beyond its control." On October 25, 1974, Senator Trinh deposited an
additional 1 million piasters. At that time, Citibank/Saigon paid
interest on passbook savings accounts at a rate of 19% annually,
compounded daily. Pet. App. 2a-3a, 20a-21a.
In April 1975, hostile forces converged on Saigon. The American
Embassy developed plans for the evacuation of United States and
selected Vietnamese citizens, including Citibank employees. During
this period, Citibank/Saigon informally encouraged its depositors to
withdraw their money, but "the situation did not safely allow for the
posting of formal notices suggesting such withdrawals" (Pet. App. 4a,
21a). On April 24, 1975, Citibank/Saigon ceased operations, and its
officers and employees left the city. The officers left the books and
records at the branch and entrusted the branch's cash, keys, vault
combination, and official documents to Embassy officials with
instructions that the items should be turned over to the National Bank
of Vietnam, the government's central banking authority. The following
day, the Vietnamese government issued a communique stating that
Citibank/Saigon had "closed temporarily without asking for permission"
and that "the National Bank guarantees to return all the money legally
deposited." Id. at 4a, 5a, 21a-22a.
On April 30, 1975, the Vietnamese government collapsed and the
following day the revolutionary forces announced the formation of a
communist administration. The new government declared that all banks
would be "confiscated and, from now on, managed by the revolutionary
administration" (Pet. App. 4a, 22a). The communist government
reopened the National Bank of Vietnam and stated that it intended to
liquidate "all debtor banks, including all foreign banks" and "pay out
savings to workers and people according to new banking regulations"
(id. at 22a). In the case of "banks whose owners have fled the
country, the national bank will inventory and re-evaluate their assets
and settle their accounts in order to determine their ability to
return the savings of account holders" (id. at 23a). The National
Bank indicated that "the savings accounts of workers, who legitimately
earn their income through their own efforts and labor, will gradually
be paid to them," but the property of "comprador bourgeoisie" would be
"confiscated completely or partly according to the gravity of their
crimes." Id. at 4a-5a, 23a, 51a-52a.
Senator Trinh was placed in a "re-education" camp. After his
release in 1980, he sent his Citibank passbook to respondent, who
resided in Michigan and had become a United States citizen.
Respondent contacted Citibank's New York office and requested payment
of the deposit. Citibank informed respondent that the National Bank
of Vietnam was now responsible for the account. Pet. App. 5a, 38a.
2. Respondent brought suit in the United States District Court for
the Eastern District of Michigan to collect the sums allegedly owed
under the deposit agreement. After a bench trial, the district court
concluded that Citibank was liable and awarded respondent the current
value of the account -- $1400 plus interest. Pet. App. 37a-59a. The
district court began its analysis by noting that the Second Circuit
had held in Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854
(1981), cert. denied, 459 U.S. 976 (1982), that a United States bank
was liable to its Vietnamese depositors when it closed its Saigon
branch in virtually identical circumstances. See Pet. App. 38a-39a.
It therefore viewed the question as whether this case was
distinguishable from Vishipco.
The district court first concluded that it could properly exercise
jurisdiction because the parties satisfied the diversity of
citizenship requirement (28 U.S.C. 1332) and, alternatively, because
disputes arising out of foreign banking transactions are "deemed to
arise under the laws of the United States" (12 U.S.C. 632). See Pet.
App. 39a-40a. The court next agreed with Citibank that, under either
jurisdictional basis, the applicable choice of law rules dictated that
Vietnamese law governed the dispute. Id. at 41a-44a. The court then
concluded that while Vishipco was decided under New York law, the same
result would obtain under Vietnamese law, including Vietnamese
principles of force majeure. Id. at 45a-50a. It also concluded that
Citibank had failed to prove that the National Bank of Vietnam had
assumed liability for respondent's account; instead, the court ruled
as a matter of law that when Citibank closed its Saigon branch the
home office assumed liability for that account. Id. at 50a-51a. The
court then converted the value of the piaster account into dollars to
determine Citibank's liability. Id. at 54a-59a.
3. Citibank appealed and the United States filed an amicus curiae
brief urging reversal. The court of appeals affirmed (Pet. App.
1a-32a), rejecting Citibank's "primary argument" that the deposit
agreement construed under Vietnamese law placed the risk of loss for a
political revolution on the depositor (id. at 7a-13a).
The court started from the premise, followed in Vishipco, that "it
is a general banking principle that the home office is ultimately
liable on a deposit placed in its foreign branch if, as here, the
branch closes or otherwise wrongfully refuses to return a deposit"
(Pet. App. 9a, citing Sokoloff v. National City Bank, 130 Misc. 66,
73, 224 N.Y.S. 102, 114 (Sup. Ct. 1927), aff'd, 223 A.D. 754, 227
N.Y.S. 907, aff'd, 250 N.Y. 69, 164 N.E. 745 (1928); Bluebird
Undergarment Corp. v. Gomez, 139 Misc. 742, 249 N.Y.S. 319 (City Ct.
1931); Heininger, Liability of U.S. Banks for Deposits Placed in
Their Foreign Branches, 11 Law & Pol. Int'l 903, 926 (1979)). The
court acknowledged that "the bank is surely correct in arguing that
absent special circumstances, deposits made in branch banks are
payable only there" (Pet. App. 9a), but it added:
However, as we read Sokoloff, Bluebird and similar cases, one of
the "special circumstances" triggering liability against the
home office is the closing of a branch." Bluebird, 249 N.Y.S. at
321-22. Thus, while it is true that the payment obligation
exists primarily between the branch bank and the depositor, the
ultimate obligation on the deposits remains with the home
office. Id.; Vishipco, 660 F.2d at 863; see also Annotation,
Branch Banks, 136 A.L.R. 471, 493-97 (1942).
Ibid.
The court stated that Vietnamese law supported that conclusion
because it required Citibank/Saigon to operate as a branch, rather
than a subsidiary, and thereby implicitly indicated that Citibank's
home office would be liable for the deposits. Id. at 10a. The court
concluded that the deposit agreement's waiver of liability for
government action "did not dispel these expectations" (id. at 11a),
observing:
while we recognize that the deposit agreement absolved the
branch office of responsibility for losses resulting from
government orders and "any other cause beyond its control," we
do not find in that agreement any indication that the depositor
could not proceed against the home office if the branch failed
to pay.
Ibid. The court stated that contractual provisions limiting home
office liability "must be explicit and must clearly and unmistakably
inform depositors that they have no right to proceed against the home
office" (id. at 12a). The court also concluded that Vietnamese
principles of force majeure did not excuse repayment because Citibank
"remains able to this day() to discharge those debts either in New
York or at a variety of other points outside of Vietnam" (id. at 13a).
The court of appeals also rejected Citibank's defense that the
National Bank of Vietnam had assumed liability for the respondent's
account. Pet. App. 13a-17a. It concluded that South Vietnam's
guarantee that all deposits would be repaid was not legally binding on
the new government and that the various communiques failed to
establish that, "by confiscating the nation's banks, the new
government undertook to assume the liabilities of foreign banks, like
Citibank Saigon, that fled the country in the face of the fall of
South Vietnam" (id. at 15a). The court further reasoned, in
accordance with Vishipco, that when Citibank closed its Saigon branch,
"the deposits in Citibank Saigon no longer had their 'situs' in
Vietnam" (id. at 16a). Instead, their situs "sprang" and attached to
the home office, and the Vietnamese government was powerless to affect
them (ibid., citing Heininger, supra, 11 Law & Pol. Int'l Bus. at
975). Finally, the court agreed with the Second Circuit that holding
the home office liable was "fair and equitable under the
circumstances" (Pet. App. 17a, citing Vishipco, 660 F.2d at 864).
Judge Brown dissented, concluding ("(w)ithout intending to
deprecate Citibank's other defenses") that the deposit agreement, read
in light of Vietnam's force majeure principles, placed the risk of
loss on respondent. Pet. App. 19a-32a. He stated:
I agree with Citibank that Trinh must bear the loss of his
savings deposit. I would so hold because I believe the deposit
agreement so requires. * * * Here, the communist overthrow of
South Vietnam and subsequent confiscation and nationalization of
Citibank's Saigon branch surely falls within the deposit
agreement's discharge-of-liability provision and prevents
Citibank's domestic home office from paying Trinh in Vietnam in
piasters. Consequently, the deposit agreement calls for Trinh
to suffer the loss and, in turn, Trinh's action against Citibank
must fail.
Id. at 30a.
DISCUSSION
Citibank asserts that the court of appeals erred in holding that
the deposit agreement in this case obligated Citibank's New York
office to repay foreign branch deposits when the branch closed on
account of imminent invasion. It urges this Court to review the case
and clarify, as a matter of federal law, that a United States bank is
not liable for repayment of a foreign branch deposit when a foreign
sovereign prevents the branch from making repayment. We believe that
Citibank is correct in asserting that the court of appeals
misconstrued the parties' deposit agreement and the principles of
banking law that govern it. We also agree that the decision reflects
a departure from established law and could portend future difficulties
for United States banking interests. Notwithstanding these failings,
we are unable to conclude that this decision, standing alone, would
normally warrant this Court's review. Nevertheless, the decision
raises issues related to those presented in Citibank, N.A. v. Wells
Fargo Asia Ltd., No. 88-1260, a case that we believe does merit
review. If this Court grants Citibank's petition for a writ of
certiorari in Wells Fargo, it may wish to grant this petition and to
consider the related issues in a consolidated proceeding. In the
alternative, it may wish to hold this petition and dispose of it in
accordance with its disposition of Wells Fargo.
1. This case presents a factual situation that is virtually
identical to that presented in Vishipco Line v. Chase Manhattan Bank,
N.A., supra. The Court invited the United States' views concerning
the petition for a writ of certiorari filed in that case. The
government noted the significant practical consequences of the court
of appeals' decision and expressed serious reservations about the
court of appeals' application of the relevant law. /3/ The government
concluded, however, that the decision did not warrant this Court's
review. 81-1591 U.S. Amicus Br. 7. We explained that this isolated
decision, which purported to resolve conflicting claims under local
contract law, did not present an issue that this Court normally would
examine. Id. at 15. /4/
The court of appeals in the present case has essentially repeated
the Second Circuit's mistakes in Vishipco. The court of appeals
correctly ruled that the deposit agreement was subject to the law of
Vietnam and that Vietnamese law would recognize "general banking
principle(s)" that are customarily followed worldwide (Pet. App. 7a
n.2, 9a). /5/ The court erred, however, in applying those principles
to the parties' deposit agreement. For reasons similar to those we
set forth in our Vishipco brief, we are unable to say that this case,
viewed by itself, has sufficient practical significance to warrant
plenary review. Nevertheless, the federal bank regulatory agencies
are deeply concerned by the court of appeals' decision, and that
concern is magnified by the fact that Vishipco is no longer an
isolated aberration.
a. As we explain in our amicus curiae brief in Citibank, N.A. v.
Wells Fargo Asia Ltd., No. 88-1260, there is essentially universal
consensus that, as between private parties, "'(t)he situs of a bank's
debt on a deposit is considered to be at the branch where the deposit
is carried' and that 'the consequence of this limitation is that a
debt on a deposit normally authorizes a demand for the money only at
the relevant branch'" (U.S. Amicus Br. 10). There is also widespread
consensus that, if the branch wrongfully refuses to repay the deposit
on demand, the depositor may have a cause of action against the home
office for the branch's breach of the deposit agreement. Id. at 12-13
n.17. The court of appeals properly assumed that Vietnamese law would
recognize these principles. See Pet. App. 9a. The court erred,
however, in failing to give effect to the specific terms of the
deposit agreement in this case, which (among other matters) expressly
stated that Citibank would repay the deposits only at its Saigon place
of business and provided that Citibank would not be liable for losses
resulting from "government" action "or from any other cause beyond its
control" (id. at 3a, 21a).
There can be no serious dispute that the communist invasion of
Saigon prevented Citibank from fulfilling its contractual obligation
to repay respondents' account at Citibank's Saigon place of business.
Nor can there be any serious dispute that this was the "cause" of
respondent's loss and that this cause was beyond Citibank's control.
Indeed, the court of appeals recognized that the deposit agreement's
disclaimer "absolved the branch office of responsibility" in these
circumstances. Pet. App. 11a (emphasis in original). The court
nevertheless was unable to "find in that agreement any indication that
the depositor could not proceed against the home office if the branch
has failed to pay" (ibid. (emphasis in original)). But the court
failed to recognize that respondent was entitled to proceed against
Citibank's home office only for breach of the deposit agreement, which
contractually obligated Citibank to repay respondent's deposit at the
Saigon branch. Respondent has no cause of action at all unless there
was an actionable breach of that obligation. And there was no
actionable breach in this case because the deposit agreement excused a
failure to pay that was caused by events beyond Citibank's control.
As Judge Brown's dissent recognizes, the deposit agreement's
disclaimer must necessarily discharge both Citibank's Saigon branch
and its home office "if the governmental action or other cause
precludes payment in Vietnam in piasters" (id. at 30a). The court of
appeals' contrary conclusion judicially modifies the essential terms
of the parties' agreement and holds Citibank contractually liable for
obligations that it specifically declined to undertake. /6/
b. The parties' submissions concerning the law of Vietnam and
general banking principles indicate that the same result would obtain
even in the absence of the deposit agreement's disclaimer. /7/
Article 701 of the Vietnamese Commercial Code (V.C.C.) provides that a
"debtor does not have to pay damages if his violation or
non-performance of contractual obligations is due to a fortuitous
cause or case of force majeure" (Pet. App. 8a n.3). Article 1206 of
the V.C.C. provides, more specifically, that a "depositary is not
liable for accidents or risks resulting from force majeure, unless
previously he had been given notice to return the deposited objects"
(ibid.). As we have explained, Citibank's contractual obligation was
to repay respondent's funds, in the form of piasters, solely at
Citibank's place of business, which the deposit agreement defined as
the Citibank/Saigon branch. As the court of appeals acknowledged (id.
at 13a), the circumstances that prevented Citibank from fulfilling
that contractual obligation fell within the meaning of force majeure.
Since Vietnamese law provided that Citibank "is not liable" and "does
not have to pay damages" (id. at 8a n.3, 12a) in those circumstances,
it relieved Citibank of its contractual obligation. The court of
appeals' suggestion that Vietnamese law "did not relieve Citibank of
its obligation to perform elsewhere" (id. at 13a) again overlooks the
fact that Citibank's contractual obligation was to perform at
Citibank/Saigon. As Justice Holmes stated in a similar circumstance
involving an Austria-Hungarian bank account:
The only primary obligation was that created by the law of
Austria-Hungary and if by reason of an attachment of property or
otherwise the courts of the United States also gave a remedy the
only thing that they could do with justice was to enforce the
obligation as it stood, not to substitute something else that
seemed to them about fair.
Zimmerman v. Sutherland, 274 U.S. 253, 255 (1927). Thus, "if that law
discharged the debt the debt was discharged everywhere" (id. at 256).
c. The court of appeals also seems to have erred in rejecting
Citibank's contention that the new Vietnamese government, which had
"confiscated" Citibank's branch (Pet. App. 4a), had assumed
responsibility for the depositor's account. The court's conclusion is
inconsistent with common sense and the practical realities of the
communist overthrow of the Vietnamese government. Indeed, the new
government's own communiques stated that the government's central bank
would liquidate "all debtor banks, including all foreign banks," and
"pay out savings to workers and people according to new banking
regulations" (id. at 22a; see also id. at 5a, 23a). The court's
conclusion is also inconsistent with the Foreign Claims Settlement
Commission's determination that "accounts in South Vietnamese banks
owned by persons or entities located outside the country were
nationalized, expropriated, or otherwise taken, within the meaning of
the present (International Claims Settlement) Act, as of May 1, 1975."
See In re Claim of Hugh R. Harris, Dec. No. V-0446, at 2 (Aug. 22,
1985) (Citibank C.A. Br. App. C).
The court of appeals' alternative ruling that the new Vietnamese
government could not have seized the deposit also is unsatisfactory.
The court endorsed Vishipco's "springing debt" theory, which holds
that if a bank closes a foreign branch, "'the situs of the debt
represented by the deposit would spring back and cling to the home
office'" (Pet. App. 16a & n.5). See also Edelmann v. Chase Manhattan
Bank, N.A., 861 F.2d 1291, 1304 (1st Cir. 1988) (dicta). This theory
has no firm foundation in the law; instead, it rests on a metaphor
that a commentator used to describe Judge Cardozo's decision in
Sokoloff v. National City Bank, 239 N.Y. 158, 145 N.E. 917 (1924).
See Heininger, supra, 11 Law & Pol. Int'l Bus. at 975. As Justice
Cardozo himself later warned, "Catch words and labels * * * are
subject to the dangers that lurk in metaphors and symbols, and must be
watched with circumspection lest they put us off our guard." Henneford
v. Silas Mason Co., 300 U.S. 577, 586 (1937). This case aptly
illustrates that point.
Judge Cardozo's decision in Sokoloff -- which the New York courts
quickly confined to its facts, see note 11, infra -- addressed whether
the Bolshevik government's seizure of a New York bank's Russian branch
discharged the bank's liability to a depositor at that branch. The
court determined, on the pleadings, that the depositor could maintain
an action "based upon the theory of rescission with an accompanying
right to restitution" or "based upon the theory of the breach of an
outstanding contract" (239 N.Y. at 171, 145 N.E. at 921). The court
did not determine that the closure of the branch office altered the
situs of the debt. /8/ The "spring and cling" proposition is simply a
commentator's lively, but inaccurate, description of the case. /9/
We believe that Justice Harlan's dissent in United States v. First
Nat'l City Bank, 379 U.S. 378 (1965), correctly explained the
principle set forth in Sokoloff. The Court held that the district
court in that case had jurisdiction to issue a temporary tax
injunction freezing a corporation's account in a U.S. bank's Uruguayan
branch pending personal service on the corporation (id. at 385). It
found no occasion to address the Sokoloff case (id. at 380-381).
Justice Harlan disagreed with the Court's holding and in the course of
his opinion he described the status of the Uruguayan branch account
under Sokoloff as follows:
The bank account is a contract for payment on demand at the
Montevideo branch. If demand were wrongfully refused, a cause
of action for breach of contract would be created on which (the
depositor) could sue in New York. Thus, analytically, it is not
the account itself which would become payable in New York, but
damages for breach of the contract to pay on demand in
Montevideo.
379 U.S. at 405 n.27 (emphasis added). /10/ As we have explained,
there is no actionable breach of contract action in this case because
the deposit agreement and Vietnamese law absolved a failure to pay
where the cause of the failure was beyond the bank's control. /11/
d. The federal banking agencies, including the Board of Governors
of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency, are
greatly troubled by the court of appeals' fundamental misapplication
of familiar banking law principles to the deposit agreement in this
case. The Second Circuit's decision in Vishipco created substantial
uncertainty concerning the status of Vietnamese bank deposits and,
more generally, the potential legal liability of United States banks
for foreign branch deposits. The court of appeals' decision in this
case has only compounded that uncertainty.
As we explained in amicus curiae brief in Citibank, N.A. v. Wells
Fargo Asia Ltd., supra, this Court normally does not review a court of
appeals' interpretation of a particular contractual agreement (88-1260
U.S. Amicus Br. 15-16). That case, we have suggested, presents an
appropriate occasion for an exception to that general rule because the
lower court's interpretation of the Eurodollar deposit agreements at
issue there would have immediate and serious consequences for the
functioning of the Eurodollar market. In contrast, the practical
consequences of the court of appeals' decision in this case are not so
immediate that they call as powerfully for this Court's review.
As an initial matter, the dispute in this individual case involves
a relatively small amount of money -- about $1400 plus accrued
interest (Pet. App. 59a). Furthermore, it is not clear that United
States banks are likely to face large liabilities for new claims
arising from deposits held in Saigon branches during the Vietnam
conflict. Other lower courts have rejected claims filed after 1981 on
statute of limitations grounds. See Tat Ba v. Chase Manhattan Bank,
N.A., 616 F. Supp. 10 (S.D.N.Y.), aff'd without opinion, 762 F.2d 991
(2d Cir. 1985); Ngoc Dung Thi Tran v. Citibank N.A., 586 F. Supp. 203
(S.D.N.Y. 1983). /12/ Thus, the court of appeals' interpretation of
the deposit agreement, Vietnamese substantive law, and the actions of
the new Vietnamese government with respect to foreign branches, are
unlikely to have lasting significance. /13/
Applying the standards that the United States normally employs in
determining whether to petition for a writ of certiorari, we therefore
cannot say that this case clearly warrants this Court's review. If
the court of appeals' decision is viewed in its proper context, it has
limited practical or precedential importance. Obviously, the Sixth
Circuit's replication of the Second Circuit's errors in Vishipco
increases the danger that other courts may give those decisions
greater credence or broader application than they deserve. In
particular, there is a substantial possibility that American courts
may mistakenly apply those cases as precedent in interpreting other
deposit agreements, other foreign substantive law, and other foreign
governmental actions. See Edelmann v. Chase Manhattan Bank, N.A., 861
F.2d 1291, 1304 (1st Cir. 1988). But such possibilities are present
in many cases in which review is sought from this Court, and we are
reluctant to urge that this Court grant the petition based on that
ground alone.
That being said, this Court may, by virtue of Wells Fargo's
pendency, find benefit in reviewing this case at this time. The court
of appeals relied upon the same general banking law principles that
are implicated in Wells Fargo. If, as we have urged, this Court
grants the petition for a writ of certiorari in that case, it may wish
to grant this petition as well and consolidate the cases for review.
That procedure would allow the Court to examine a broader range of
issues -- and to correct the potentially troublesome decision in this
case -- with minimal additional expenditure of its limited resources.
In the alternative, if the Court grants the Wells Fargo petition, it
may wish to hold this petition for disposition in accordance with its
resolution of that case.
2. Citibank principally argues that the Court should grant review
in order to articulate a "uniform federal rule," based on federal
preemption or federal common law, "that United States banks are not
liable for the risk of foreign sovereign actions preventing or
restricting payment of foreign deposits" (Pet. 12). In our view,
however, if the Court were to grant the petition in this case it would
find it unnecessary to articulate a "uniform federal rule." Citibank
argued in the courts below "that the deposit agreement construed under
Vietnamese law places the risk of loss for a political revolution on
the depositor not on the domestic home office" (Pet. App. 7a). As we
have explained, the court of appeals erred in rejecting that argument
and correction of that error would provide a sufficient basis for
reversal. The question presented in Citibank's petition appears to be
sufficiently broad to subsume that issue.
Citibank did not propose to the court of appeals, however, that a
"uniform federal rule" governing home office liability for foreign
branch deposits applies in this case. This Court generally does not
address arguments that the court of appeals did not have an
opportunity to consider. See, e.g., Granfinanciera, S.A. v. Nordberg,
109 S. Ct. 2782, 2788-2789 (1989). This practice rests, at least in
part, on prudential concerns. For example, the Court indicated in
Granfinanciera that it may obtain useful guidance from the considered
views of a court of appeals and a district court that have developed a
record for review. See id. at 2789. That concern is relevant here.
For example, Citibank contends (Pet. 19-20; Reply Br. 9-10) that a
uniform federal rule is necessary because United States banks may be
unable to employ deposit agreements that would unambiguously relieve
them of liability. This Court does not have the lower courts' views
of this essentially factual matter. Furthermore, Citibank did not
introduce evidence at trial to support that assertion. Thus, the
Court may ultimately find that the record in this case is inadequate
to assess the matter properly.
There also are important jurisprudential reasons why the Court
should decline to address an issue that was not raised below. If
"Citibank's primary argument" below is correct and conclusively
resolves this case, there is no need to search for a broader
rationale. /14/ The Court should be especially reluctant to employ
principles of federal preemption or federal common law to correct a
court of appeals' mistaken interpretation of a contractual agreement.
As we observe in our amicus curiae brief in Wells Fargo, federal
preemption and federal common law come into play only if there is a
conflict between federal law or policy and otherwise applicable law.
See Boyle v. United Technologies Corp., 108 S. Ct. 2510, 2515 (1988);
City of Milwaukee v. Illinois, 451 U.S. 304, 312-314 (1981). Those
doctrines -- which have the far-reaching effect of displacing positive
law -- are not necessary if otherwise applicable law adequately
protects federal interests.
This point has special relevance in the case of banking law.
International banking transactions are conducted in accordance with
generally understood banking law principles. Federal bank regulation
has developed in tandem with, takes account of, and typically reflects
those established principles. In most situations, there should be no
conflict between federal interests and general banking law principles
if the content of each is correctly recognized and applied. This case
aptly demonstrates that point. If the court of appeals had correctly
interpreted Citibank's agreement with respondent, there would be no
conceivable conflict with federal interests.
We cannot say with assurance that this Court may never need to rely
on federal preemption or federal common law to resolve international
banking disputes. Indeed, the federal act of state doctrine and the
exceptions thereto indicate that judicially-made federal law may
figure prominently in such cases. /15/ And we cannot deny that an
advisory ruling would "provide clarity for bank management and federal
regulators" (Pet. 19). But we are obliged to observe that this Court
does not exercise its Article III powers for that purpose. Until a
conflict materializes, in the form of a concrete legal dispute that
requires application of federal law, there is no need to articulate a
federal rule. /16/
CONCLUSION
The petition for a writ of certiorari should be disposed of in
accordance with the disposition of the petition filed in Citibank,
N.A. v. Wells Fargo Asia Ltd., No. 88-1260.
Respectfully submitted.
KENNETH W. STARR
Solicitor General
STUART M. GERSON
Assistant Attorney General
THOMAS W. MERRILL
Deputy Solicitor General
JEFFREY P. MINEAR
Assistant to the Solicitor General
ABRAHAM D. SOFAER
Legal Adviser Department of State Washington, D.C. 20520
EDITH E. HOLIDAY
General Counsel Department of the Treasury Washington, D.C.
20220
J. VIRGIL MATTINGLY
General Counsel Board of Governors of the Federal Reserve System
Washington, D.C. 20551
MARK I. ROSEN
Deputy General Counsel Federal Deposit Insurance Corporation
Washington, D.C. 20429
ROBERT B. SERINO
Acting Chief Counsel Office of the Comptroller of the Currency
NOVEMBER 1989
/1/ Citibank also has filed a petition for a writ of certiorari
seeking review of a decision of the United States Court of Appeals for
the Second Circuit holding that Citibank's New York office is
obligated to repay two Eurodollar deposits that a Singapore bank
placed with a Citibank branch located in Manila, Republic of the
Philippines. See Citibank, N.A. v. Wells Fargo Asia Ltd., No.
88-1260. The Solicitor General has filed a separate brief setting
forth the United States' views in that case.
/2/ Our amicus curiae brief in Citibank, N.A. v. Wells Fargo Asia
Ltd., No. 88-1260, provides a brief description of the federal law
governing foreign branch operations. See U.S. Amicus Br. 2-3.
/3/ Our brief noted that the outcome of the case has "significant
practical implications," "implicates the interests of federal
regulatory agencies," and "raises serious concerns about the
protection of American citizens and investments overseas" (81-1591
U.S. Amicus Br. 7). It also expressed "substantial misgivings about
the correctness of the decision" (id. at 10), noting that the deposit
agreement seemed to relieve the bank of liability under the
circumstances, that there is "room to doubt whether the 'spring(ing)
deposit' theory applied by the court of appeals is soundly grounded in
New York law," and that "it could reasonably be concluded that when
Vietnam confiscated the assets abandoned by petitioner in Saigon, and
thereafter assumed banking operations, it simultaneously assumed
responsibility for making repayment to depositors" (id. at 10-11).
For the convenience of the Court, we have reproduced our amicus curiae
brief in Vishipco as an addendum to this brief. See Add., infra,
1a-17a.
/4/ The petition had asserted that the court of appeals erroneously
applied the act of state doctrine. We explained that the court of
appeals' opinion "does not support that argument. Rather, the court
merely applied state law * * * to resolve a somewhat unusual breach of
contract dispute. The court's resolution may well be erroneous, but
it does not present a substantial federal question" (81-1591 U.S.
Amicus Br. 7). We also noted that this result might be avoided in the
future "by amendment of the deposit contracts in question, or by
separate incorporation in foreign nations that permit that course of
action," which in turn "highlight(s) the fact that the decision of the
court of appeals turns on the particular deposit contracts consummated
by petitioner and respondents, not on any issue of federal law
warranting this Court's review" (ibid.).
/5/ As we explain in our amicus curiae brief in Citibank, N.A. v.
Wells Fargo Asia, Ltd., supra, the courts' references to general
banking principles refers to positive banking law that enjoys
virtually universal acceptance. 88-1260 U.S. Amicus Br. 9-10 n.12.
/6/ Citibank's specific promises to repay the deposit only at
Citibank's Saigon's place of business and only in piasters are plainly
essential terms of the agreement. Indeed, United States interest rate
restrictions and Vietnamese foreign exchange controls prohibited
Citibank from offering a Vietnamese citizen a dollar-denominated
savings account, earning interest at a 19% annual rate, payable in the
United States. See Pet. App. 2a-3a, 27a; C.A. App. 65-66, 70-72.
And the court's suggestion that the deposit agreement "must clearly
and unmistakably inform depositors that they have no right to proceed
against the home office" (Pet. App. 12a) is inconsistent with the
general understanding, reflected in the Federal Reserve Board's
regulations, that a United States bank's home office is not liable for
foreign sovereign interference with a foreign branch's failure to
repay a deposit unless the home office expressly undertakes that
liability. See 12 C.F.R. 204.128.
/7/ American courts would look to the law of the place where the
deposit was made to determine whether there has been an actionable
breach and any consequent remedy. See, e.g., Zimmerman v. Sutherland,
274 U.S. 253, 255-256 (1927); Dunn v. Bank of Nova Scotia, 374 F.2d
876, 877 (5th Cir. 1967); U.C.C. Section 4-102(2) (1977).
/8/ The Court of Appeals made only a brief mention of the situs of
the deposit, stating:
The intangible chose in action, at least when it is the result
of a deposit in a bank, has for some purposes a situs at the
residence or place of business of the debtor, though the
creditor be far away * * *. The debtor in this instance, though
domiciled in the United States, may have had what was equivalent
to a residence in Russia while it was doing business at its
Russian branch. There is doubt whether its residence in Russia
can be said to have continued after its branch had been seized
and its business had been closed * * *. The decision of this
case does not require that such doubts should be resolved.
239 N.Y. at 169, 145 N.E. at 920.
/9/ Sokoloff ultimately elected to characterize his suit as a
breach of contract action and eventually was awarded damages based on
the value of the rubles on deposit on the date that the bank's Russian
branch ceased to function. See 130 Misc. 66, 224 N.Y.S. 102 (Sup. Ct.
1927), aff'd, 223 A.D. 754, 227 N.Y.S. 907 (1928). The New York Court
of Appeals affirmed the judgment, stating that the bank was precluded
from arguing that the Russian government's seizure of its property
rendered performance impossible because "the United States has not
recognized the Soviet government, and in consequence, the seizure and
nationalization of the banks is not an act of government within the
recognized principles of international law" (250 N.Y. 69, 81 164 N.E.
745, 749 (1928)). Cf. Banco Nacional de Cuba v. Sabbatino, 376 U.S.
398, 428 (1964); United States v. Belmont, 301 U.S. 324 (1937).
/10/ See also Tillman v. National City Bank, 118 F.2d 631, 633 (2d
Cir.) ("the deposits in defendant's branches were not converted into
continuous deposits payable in New York on account of the closing of
the Russian branches"), cert. denied, 314 U.S. 650 (1941); 118 F.2d
at 635 (a cause of action for "the frustration of the deposit contract
through the closing of the Petrograd branch, or through breach of that
contract" was time barred). Accord Tat Ba v. Chase Manhattan Bank,
N.A., 616 F. Supp. 10 (S.D.N.Y.), aff'd without opinion, 762 F.2d 991
(2d Cir. 1985).
/11/ Moreover, as Judge Brown correctly observed, "the Sokoloff
cases simply do not stand for the broad general proposition that an
American bank's home office is always ultimately liable for the debts
of its foreign branches" (Pet. App. 31a). The New York courts have
confined Sokoloff to its peculiar facts, which involved a Russian
citizen that placed his deposit, in dollars, at the U.S. bank's home
office and instructed that the deposit be credited to the foreign
branch. See Dougherty v. Equitable Life Assurance Society, 266 N.Y.
71, 88, 193 N.E. 897, 903 (1934); Dougherty v. National City Bank,
157 Misc. 849, 862-864, 285 N.Y.S. 491, 506-508 (Sup. Ct. 1935). The
Sokoloff referee himself drew this distinction, observing that "we are
not concerned with questions of liability for transactions originating
in Russia and wholly to be performed in Russia, but with a debt
incurred in this state which the defendant agreed to pay on demand at
its own branch in Petrograd" (130 Misc. at 73-74, 224 N.Y.S. at
114-115). The trial court later added in determining the measure of
damages:
Where the cause of action arose exclusively in the foreign
country and the jurisdiction of our courts is secured merely
because the debtor has been served or his property has been
attached in the state of the forum, the courts here will only
grant that relief that the creditor could have secured if the
action had been brought in the courts of that country; but
where the jurisdiction of our courts was sought to enforce
rights which arose under our laws, then the relief would be
granted as of the time when the liability accrued under our
laws. The decisions in this State are in harmony with the above
rule.
130 Misc. at 87, 224 N.Y.S. at 128-129. See also Restatement (Third)
of the Foreign Relations Law of the United States Section 414
reporter's note 6 (1987) (characterizing Sokoloff as involving a "New
York depositor").
/12/ Those courts held that the plaintiffs' suits were necessarily
based upon a theory that the closing of the Saigon branches breached
the deposit agreements and that the limitation period therefore
commenced running upon the closing of the branch. 616 F. Supp. at 12;
586 F. Supp. at 205, 206. That approach implicitly rejects the
"springing debt" theory. Other courts, however, have permitted claims
to proceed long after the closing of the foreign branch. See Edelmann
v. Chase Manhattan Bank, N.A., 861 F.2d 1291 (1st Cir. 1988) (Cuban
certificate of deposit).
/13/ It is also relevant that, as a prospective matter, United
States banks may have greater latitude with respect to passbook
savings accounts to set forth terms and conditions concerning home
office liability in the event that a foreign government prevents a
branch from repaying deposits than those banks have in the minimally
documented Eurodollar market. Furthermore, United States banks may be
able to amend existing agreements: the deposit agreement in this case
subjected the depositor to "all subsequent amendments" of the deposit
agreement (C.A. App. 126). We must assume, notwithstanding the
decision in this case, that the courts would enforce such agreements
or amended agreements in accordance with their terms.
/14/ Citibank's call for a "uniform federal rule" may reflect a
concern, which we have acknowledged (see p. 15, supra), that this
Court normally would not review a court of appeals' interpretation of
a particular contract. We nevertheless believe that this Court may
find it desirable to review such a case in appropriate circumstances.
If this case warrants such review, then it warrants reversal on the
grounds argued below.
/15/ As we explain in our amicus curiae brief in Wells Fargo
(88-1260 U.S. Amicus Br. 19 & n.29), the act of state doctrine
recognizes that a foreign sovereign has authority to affect
debtor-creditor relationships involving debts payable within its
jurisdiction. See generally Banco Nacional de Cuba, 376 U.S. at 428.
Thus, a U.S. bank may be relieved of its obligation to return a
deposit if a foreign government seizes the depositor's foreign branch
account. See, e.g., Perez v. Chase Manhattan Bank, N.A., 61 N.Y.2d
460, 463 N.E.2d 5, 474 N.Y.S.2d 689, cert. denied, 469 U.S. 966
(1984). There is no need to address that issue here, however, because
the deposit agreement and provisions of Vietnamese law, properly
construed, excused Citibank from performing its contractual obligation
to repay the deposit. There is good reason to believe that the court
of appeals committed multiple errors in concluding that (1) the new
Vietnamese government seized Citibank/Saigon's assets but not its
deposit liabilities (see p. 11-12, supra); (2) the act of state
doctrine would require a U.S. court to honor such a confiscation (cf.
Belmont, 301 U.S. at 333-334 (Stone, J., concurring)); and (3)
federal law (which would govern the situs of a bank deposit for act of
state purposes) would recognize the "springing debt" theory (see p.
12-14, supra). But there is no occasion to reach any of those
questions in this case.
/16/ Indeed, we are not aware of any judicial decisions that have
addressed the question whether a "uniform federal rule" governs these
disputes. We submit that this Court, which would have the last word
on the question, should not be the first court to address it.
APPENDIX